Jones & Anor v Treasury Wine Estates Limited [2016] HCATrans 242 (14 October 2016)

Last Updated: 18 October 2016

[2016] HCATrans 242

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S128 of 2016

B e t w e e n -

BRIAN JONES

First Applicant

UTAH RETIREMENT SYSTEMS

Second Applicant

and

TREASURY WINE ESTATES LIMITED ACN 004 373 862)

Respondent

Application for special leave to appeal

GAGELER J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 OCTOBER 2016, AT 10.09 AM

Copyright in the High Court of Australia

MR M.B.J. LEE, SC: If the Court pleases, I appear with my learned friends, MR W.A.D. EDWARDS and MR I.J.M. AHMED. (instructed by Maurice Blackburn Lawyers)

MR A.S. BELL, SC: Your Honours, I appear with my learned friend, MR M.A. IZZO. (instructed by Herbert Smith Freehills)

GAGELER J: Thank you. Mr Lee.

MR LEE: The orders made by the Full Court restraining the applicants in this case, as your Honours would have seen, were made in the original rather than in the appellate jurisdiction of the Court. The reason for that is because the Chief Justice of the Federal Court, to use the words of section 20A(1) of the Federal Court of Australia Act, determined that the application was of sufficient importance to justify the Full Court exercising original jurisdiction.

Although we accept, of course, very superficially that this matter could be described as one of practice and procedure, it is not surprising, we would say, that it was regarded as of sufficient importance to be determined in the original jurisdiction by the Full Court because the practical effect of what the Full Court did, we say, will be that unless special leave is granted it will prevent interested persons – a term I will come back to – be they Australian or foreign, from invoking title 28 USC section 1782 with respect to actual or anticipated Australian proceedings of any complexity, which are case managed, including any representative proceedings.

GORDON J: Is that right – “actual or anticipated”?

MR LEE: Yes. The Supreme Court of the United States has made it quite plain in Intel that the section has work to do - Intel Corporation v Advanced Micro Devices Inc 542 US - - -

GORDON J: I understand that. I meant in terms of the effect of the Full Court’s order, the premise upon which that proposition was put.

MR LEE: It does raise – we would say the logical extension of what the Full Court did was to elevate case management considerations to such an extent to consign the ability to invoke the section to exceptional circumstances.

If one takes an example not far removed from the present case, we have Utah, a non-party, which has a statutory right to opt out of the proceedings at some stage.. The evidence below is that it wished to assess the worth of its individual claim, which is anterior to and separate from the proceedings. It wished to make a decision, for example, whether to opt out, to commence its own proceedings seeking to vindicate that claim.

What would be wrong with Utah exercising its rights under domestic American law in order to assess the claim by going through this US style discovery process? We apprehend, given what the Full Court has said, it might be said against us that in those circumstances the Federal Court has very extensive preliminary discovery obligations, a very detailed preliminary discovery regime.

GORDON J: This is not preliminary discovery; this was a step taken, was it not, while a proceeding was on foot.

MR LEE: It was, but I am addressing your Honour’s question about whether or not it would apply in respect of anticipated proceedings. If one is elevating case management concerns to an end in themselves, which we say is the heart of the second error I will come to, then the same answer that was made in this case in respect of existing proceedings could be made in respect of anticipated proceedings. That is the point I was seeking to make.

We say the error of the Full Court can be categorised in a threefold way and I will come to each of those three errors. The last one I can deal with very quickly because it was not determinative. Before doing so, can I just say one or two things about the substantive and procedural nature of the proceedings which help contextualise those errors?

If your Honours go to the application book at page 14, your Honours will see at paragraphs 6 and 7 the nature of the case. What your Honours will see is that both forms of contravening conduct went to the question of whether or not Treasury disclosed to the Australian Securities, through the ASX, inventory levels held by US distributors that were materially excessive and which, it is alleged, in turn affected Treasury’s profitability. As the Court also observed at paragraph 14:

A central issue in the class action is the extent of TWE’s knowledge concerning the alleged excess inventory held by its US Distributors and when this came to TWE’s knowledge.

If your Honours then go to paragraphs 15 and 16, it is clear that this process of US style discovery was invoked by both applicants to obtain information going to the central issue in the case.

GAGELER J: And that is in circumstances where, as we are told in paragraph 1:

Pre-trial orders for discovery and the exchange of evidence –

had been made and where we are told in paragraph 18:

No application . . . has . . . been made, or foreshadowed, for leave to administer interrogatories.

MR LEE: Yes, that is right. I should indicate something in respect of paragraph 1 while your Honour has it in front of you. There was a trial which was listed in September 2016; there is now no trial date. Your Honour is right, there was a regime put in place by the docket judge in case managed proceedings for discovery inter partes – that is, there was discovery required to be given by both a party, the applicant, and also the respondent. Of course, this was directed to an entirely different end, a process of information gathering from persons who were not parties, who were potential - or persons - - -

GORDON J: They were members of the group, though, were they not?

MR LEE: No, the deponents were not members of the group. It was one - - -

GORDON J: Not the deponents, the applicant.

MR LEE: The applicant was, yes.

GORDON J: That is what we are dealing with. We are dealing with conduct taken by a group member.

MR LEE: Yes, a non-party, and someone, as a non-party, which your Honour would be aware, there was - - -

GORDON J: Although a non-party, a group member that, unless they opt out, are bound by the common questions which you agree, as I understand the way it is put, that the documentary material sought or the evidence sought in the US was directly relevant to.

MR LEE: Yes, it was directly relevant to Utah, that group member’s individual claim, and the evidence below is that Utah were seeking to access this information broadly for two purposes: one was to assess the strength of its individual claim in circumstances where there had not been opt out to make a determination of whether or not it wanted its individual claim quelled in this proceeding by way of settlement or otherwise and, allied to that, in circumstances where there is to be a court ordered mediation, to form an assessment as to the overall strength of the case, its individual case, and whether or not it wished to support the applicant in that case being resolved.

GORDON J: So why would not someone in that position - or what is preventing that person raising that with the trial judge who has got the management of the Australian proceeding?

MR LEE: There is nothing preventing the group member doing it.

GORDON J: So why would you not do it?

MR LEE: Your Honour, it is unnecessary to do so, and in circumstances where the court found, as your Honour’s question anticipates, in effect it was necessary to get the court’s imprimatur to go through this process. We say that is, with respect, not correct. This is a process of information gathering, no different from a party using whatever inquiries it wishes to make from third parties to the litigation. There is no logical distinction between this, a process whereby Utah is seeking to procure information from third party witnesses from seeking to have communications with third party witnesses who may be prepared to give material voluntarily.

GAGELER J: Except that this is a compulsory process under a US code, under a provision that is headed “Assistance to foreign and international tribunals and to litigants before such tribunals”.

MR LEE: Yes, that is what the title says and that is what the Full Court said was the objective of the section, but that sets to naught two matters. One is, it is not only in relation to existing proceedings but anticipated proceedings, which is a good analogue to someone using it as to whether or not they wish to opt out and perhaps commence their own proceeding, and the second is it is deliberately not restricted to litigants.

This is the subject of controversy in the United States over some period, but it has been resolved and it can be invoked by persons who are not litigants strictly speaking but persons who are interested persons.

GAGELER J: But here it is being invoked in practical terms to cut across, in fact to virtually ignore, the processes of the Federal Court.

MR LEE: No, it is not, with respect. Your Honour, it is not ignoring the processes of the Federal Court. What the Court had done was to set up an interlocutory regime which involved discovery from a party to the proceedings. Now, what the evidence was below was that there was also a regime for the service of affidavit material.

In respect of two of the proposed deponents, a decision has been made not to serve affidavit evidence on behalf of the respondent in respect of the anticipated evidence of those witnesses and also to invoke a contractual equitable obligation of confidence in respect of those people. Practically speaking, the only way to procure this information without there being a suggestion that there was a breach of obligations of confidence was using some compulsory mechanism and this provided a way - - -

GORDON J: There was a mechanism, was there not, within the current proceeding in Australia to achieve that?

MR LEE: There was no mechanism that the Court suggested was a practical one. There was some suggestion - - -

GORDON J: You could have suggested it. You could at least have applied for it.

MR LEE: But why is it, we say, that – to use the example of Utah – a non-party, somebody in the United States seeking information in the United States would be required in order to make a determination as to whether or not it wished to be involved in these proceedings at all it would be necessary for them to come along as a supplicant to the Australian court in order to seek permission of the Australian court to make inquiries which are perfectly legitimate in order to determine what steps it wishes to take in respect of this individual claim?

I accept that what your Honour has put to me has more force in respect of the party, the applicant, but the flaw in the reasoning is exposed when one has regard to the position of the non-party expressly not bound by the regime set in place under the Act by these interlocutory orders to take steps which are no different, we say in theory, from, for example, someone making an application under freedom of information legislation.

We say the approach taken by the Full Court is one which, with respect, elides the distinction between a party seeking information from another party and a party legitimately making inquiries of non-parties in order to procure information which may assist its case out of court, which, as your Honour has seen from our summary of argument, made perfectly clear by Lord Brandon’s speech in the South Carolina Case, the traditional distinction between those two things.

GORDON J: Can I ask a practical question – I could not quite understand it. At application book 92, there is a further order made for discovery. Does that cover this material in some way?

MR LEE: No, it does not.

GORDON J: It was made subsequent - - -

MR LEE: Indeed, without getting into the details of the entrails of the case, your Honour, there are oral communications with which to be explored which are not apt to be revealed by reference to the production by documents. That is one of the reasons which was relied upon to support this course being undertaken.

I indicated to your Honours that there were two errors in particular that we relied upon. One was the one which can be seen clearly from paragraph 51 of the judgment at page 23 of the application book where the Court says in terms that it did “not consider that any question of comity arises” in the circumstances – that is, it dismissed it entirely as a relevant consideration. The reason given was that the US proceedings were not substantive but were adjectival to the substantive proceedings.

GORDON J: But these arguments set out follow 50. These are additional points. It is not the substantive reasoning for the refusal of the application.

GAGELER J: The substantive reason is really in paragraph 48, is it not?

MR LEE: Paragraphs 48 and 49 say the court determined it in essentially the way that I previously described as the “imprimatur point”. We accept that, but in determining it, in exercising its discretion to grant the relief sought by the respondent, the court set at naught these comity considerations. We say that should have informed, that it should have been part of the discretionary mix which would have required the court to take it into account in determining the application.

GAGELER J: How does comity play out in this particular context?

MR LEE: Comity cannot just be restricted to questions of foreign competition. We know that from what this Court said in CSR v Cigna Insurance, that it also involves the notion of appropriate deference being given to the legislative and executive acts of other sovereign nations.

Moreover, when one deals with what has been described for example by Justice Scalia as “prescriptive comity”, it must be something which goes beyond mere considerations of competition between law suits –that is, it is the respect that sovereign nations afford to each other more generally. That finds reflection not only in the practice of limiting the extraterritorial reach of statues but also in deference, proper deference, to unreasonable interference with persons exercising rights afforded to them under foreign law.

This is a case where Utah is a US entity seeking to inquire into information located in the US by deposing persons located in the United States about events that occurred in the United States and in doing so seeking to invoke what Justice Ginsburg said was a 150-year policy of the United States to provide this sort of assistance in respect of foreign proceedings.

All those considerations, we say, are matters which are set at naught by the Full Court saying, “no issues of comity arise at all”. Simply, we say it is a relevant consideration and it should have been taken into account.

GAGELER J: You said there was another point as well, I think.

GORDON J: What is the second error?

MR LEE: I want to say a little bit more about what I describe as “the imprimatur error”, which we dealt with logically first, the second error being the comity error. Could I suggest to your Honours that the notion that one needs to obtain the imprimatur of the Australian court in order to invoke this relief is intuitively surprising for a number of reasons?

The first one I have already touched on, that the court ordinarily does not exercise control over the manner in which a party obtains evidence, and that is what is happening here, let alone a non-party.

GAGELER J: The court ordinarily would see itself as the appropriate repository of control over any compulsory process that a party seeks to invoke once proceedings have commenced.

MR LEE: But, your Honour, when it comes to this notion of imprimatur, what is the logical difference between seeking to obtain information pursuant to some compulsory process or a voluntary process? The text of section 1782 has two parts. One is it provides for the process of compulsory provision of information but, secondly, it preserves the ability of US citizens to provide information voluntarily.

GORDON J: In (b).

MR LEE: Now, one does not know when it comes to this question of the imprimatur whether somebody is going to provide this information voluntarily or under a compulsion.

GORDON J: You could ask, and I assume you asked and the person said no. That is in a sense the starting point. Did Utah ask these people whether or not they would provide the evidence that they sought by application first?

MR LEE: Well, in respect of two of them at least, as I indicated earlier, there was a suggestion that there were either express or implied obligations of confidence. That creates a practical difficulty for that sort of inquiry.

It may be, for example, that in certain circumstances somebody who is under an express or implied obligation of confidence is willing in a practical sense to provide information voluntarily but they may have to fight about their ability to do so - for example, it may reveal an iniquity which would allow them to do so.

Your Honour, with respect, this notion of having to get the prior imprimatur to the court, with respect, could be perhaps perceived as being slightly precious in circumstances where the position of both the opposing party and the proposed opponent is adequately protected.

In respect of the opposing party, there can be a restraint sought on the use of the procedure upon some identified actual interference with the administration of justice or an abuse of process and, secondly, in respect of the proposed opponent, they will be protected by either successfully showing cause in respect of some show cause order being made or some sort of being sought to be heard on an inter partes basis. The difficulty here is, of course, what the - - -

GAGELER J: Mr Lee, your time is expired. You can finish the sentence, you can finish the paragraph if you wish, but - - -

MR LEE: Your Honour, in respect of the third error about equitable jurisdiction, I will just rely on paragraphs 36 to 42 of the summary of argument, if your Honour pleases.

GAGELER J: Thank you very much. Dr Bell?

MR BELL: Thank you, your Honours. I have eight points, most of them very short.

GAGELER J: Are they the eight points set out at pages 98 to 99 or are they a different eight points.

GORDON J: Why do we not have your best three?

MR BELL: Yes, your Honour. As many as your Honours need, I will provide. This is a decision about the exercise of discretion; it is not a decision about the existence of a power. The power was established authoritatively by this Court in CSR v Cigna where the Court, with the exception of Justice Brennan, identified the inherent power of an Australian court to protect its processes, once set in motion, by orders including injunctive orders – no question about power, this is all about discretion.

Secondly, it is not a House v The King case. There is no suggestion that the exercise of discretion was perverse or irrational or not open to the court.

GAGELER J: That is one category of House v The King. It is suggested that comity was excluded when it should have been included as a relevant consideration.

MR BELL: Yes, and I will come to that. Thirdly, the discretion, of course, contrary to what was put, that it was a rigid exercise of discretion by reference to case management per se, was not. The Court made that very clear, that the discretion was being exercised in the context of the circumstances of the case in paragraph 29 of the decision, about line 30:

But the present question does not directly involve this Court’s power to allow oral depositions, but rather the conduct of Jones and another group member seeking to invoke the powers of a foreign court to obtain compulsory oral discovery outside the docket judge’s case management control . . . without his knowledge or approval.

In 47 in particular, your Honours:

TWE does not submit, nor do we conclude, that the fact these proceedings are case managed provides a basis in itself -

Then dropping down to the third last line:

The vice in the present case is that the conduct of Jones and URS in invoking the US Proceedings without notice and without the imprimatur of this Court has undermined this Court’s case management and supervision of the class action.

So, discretion in a context, a very fact-specific set of circumstances. In that context, could I volunteer a different answer to your Honour Justice Gordon’s question about page 92 of the application book? On page 92, after the Full Court’s decision, the applicant sought further discovery. This is an application for further discovery. The judge is currently reserved on that application, but if one looks at what further discovery was sought, it was essentially all of the material involving, inter alia, the three proposed deponents in the US, Ms LeDrew, Mr Escalante and Mr Brauer.

If your Honours turn to pages 94 and 95, for example, you will see Sandra LeDrew and Stephen Brauer there mentioned in category 1; in category 2, LeDrew and Brauer; in category 4, LeDrew and Brauer; category 5, which is all about the make-up of the inventory which is the issue in the case; over the page in category 7, you see Mr Escalante - Mr Escalante, rather, there in category 7 and category 10.

In other words, his Honour has currently reserved in relation to that. There were plainly means within the control of the Court for seeking discovery of these materials.

GORDON J: Was there any objection to the fact that they were outside the control of the respondent?

MR BELL: No. These are the documents, the documents being sought. Ms LeDrew, for example, has filed a witness statement in the proceedings. That is a different answer I think to your Honour’s question of Mr Lee. Now, we are in the realm of practice and procedure and we have given your Honours a reference to Adam P Brown and to Re Will of Gilbert. Those observations about - and Sir Frederick Jordan’s very strong language:

the result would be disastrous to the proper administration of justice.

If appeals were regularly entertained on matters of practice and procedure is a very powerful consideration.

GAGELER J: Of course, but that could have been said in CSR v Cigna and probably was at the special leave application.

MR BELL: I could not remember that, your Honour. It may well have been.

GAGELER J: You dusted off your old notes, Dr Bell, no doubt.

MR BELL: Your Honour, there is no injustice in this order. Even if one sees an error, we do not say there was not any error of principle and I will come to comity in a moment, but there was no injustice of any substantive kind whatsoever. What the plaintiff was seeking were some procedural advantages it would like which were not open to the defendant – put that to one side.

GORDON J: What is the answer, though, to Mr Lee’s contention that we are not dealing with a party to the proceeding, we are dealing with a group member, which really seems to be one of his central points?

MR BELL: It is not correct as to 50 per cent of the case. There were two applications made in the United States. One was made by Mr Jones, who is the applicant in the proceedings. The second was made by Utah. There is a skew put on Utah’s interest in finding this information.

The material that was put before the US courts as to the reasons why the information was being sought was identical. There were identical declarations from Ms Gilsenan, an Australian lawyer, and what was put before the US court as to the reasons why the procedure was sought to be invoked are set out in paragraph 17 of the judgment on page 16. Your Honours will not find there recorded, as contained in the declarations which were put before the US court, that there was a concern by Utah to know whether it should start its own proceedings.

The reasons that were put before the US court for seeking the 1782 exercise of jurisdiction were all to do with the proceedings before the Federal Court, understanding documents which should already have been discovered by the Federal Court, forming a view about:

identifying the witnesses who could give evidence in this proceeding, potentially avoiding the need for an application being made for leave for the administration of interrogatories or for further discovery -

In other words, it was entirely bound up with the procedure before the Court. So the Utah point, we would respectfully submit, is exaggerated. The forensic thrust and the reason given to the US court by Utah was entirely in the context of this proceeding. It was not put in the context of opting out; it was how to enhance the conduct and prospects in this proceeding and Utah submitted to this Court’s jurisdiction as a party on this application. That is why it is one of the applicants before this Court and was a respondent.

GAGELER J: Dr Bell, how many of your eight points have we done?

MR BELL: The two final points are the comity consideration, and we say the Full Court was correct. What the High Court said in CSR v Cigna is that where the jurisdiction involves the protection of a court’s processes, in other words, where the inherent base, the inherent jurisdiction is being invoked, the focus is on the Australian court and its processes and the Court said, and we have given a reference, that in that case there is only one court to take into account and that is this Court.

Secondly, in the context of comity, apart from the rather critical comments of Justices Gummow and Hayne, which we have cited from Neilsen about the woolliness of that concept, apart from that, this is auxiliary; 1782 is an auxiliary provision. We are not concerned with parallel proceedings, as one was in CSR v Cigna, we are not concerned with the possible inconsistency of judgments.

It is inconsistency of judgments in the orthodox anti-suit context which gives rise to ugly rushes for judgments, courts manoeuvring et cetera and that is where real considerations of comity, to the extent they are recognised, come into play.

If the power exists in the US to help a foreign court and the foreign court says “thank you very much but we have our own powers and processes”, there is no comity involved or invoked. It is a completely different thing and it will be of no moment to a US court whether these matters are heard. The US court will not be hearing any depositions. They will be taken before a private party, just as oral pre-trial discovery is in the United States. All the US court does is give some sanction or force.

Finally, your Honour, we say it is very hard, on the facts of this case, to see how the Full Court possibly erred in the decision. The decision is correct, and plainly so. We say the corollary of that is that, even if special leave were to be granted, the case just does not have sufficient prospects of giving rise to a different result. So it would be an expensive and time-consuming exercise and for the parties unnecessary.

The Full Court’s judgment is clear and it is clearly expressed in the very particular context of the matters before that court and the chronological history of the case management of the class action.

GAGELER J: Thank you. Mr Lee?

MR LEE: On that last issue first; it is plain that what the court found in effect was that an injunction would lie unless the Federal Court’s imprimatur was sought to be obtained prior to invoking this procedure. That is something which is not fact-specific and that was the determinative finding of the court.

Secondly, the answer I gave with respect to paragraph 92 of the judgment was correct. The deposition is directed to oral communications, including oral reports, but I do not need to dwell further on that. Thirdly, my friend’s criticism of the tone of the argument, with respect, does not give full effect to the width and flexibility of the notion of comity and it is plain, since Joseph Story 182 years ago, that it goes beyond competition of courts or, as my learned friend says, whether another court would be concerned about being enjoined.

It is dealing with, in this case, the unreasonable interference, we say, with the rights lawfully invoked by both the applicant and, in particular, Utah under US domestic law. Utah’s application was not simply to obtain information in respect of the agitation of the applicant’s case in these proceedings.

In terms, the material before the US court was that it was conscious that it had an individual claim, which existed separately from the proceedings. It wished to invoke its ability to obtain information about what it should do in relation to the claim, particularly in the context of a court ordered mediation where there would be, subject to section 33V of the Federal Court of Australia Act, the ability of the applicant to seek orders which would quell its individual controversy with the respondent. If your Honours please.

GAGELER J: Thank you, Mr Lee.

The orders of the Full Court of the Federal Court turned on an exercise of discretionary judgment focused on the particular facts of this case. The correctness of that discretionary judgment is, in our opinion, not open to doubt. The application is dismissed with costs.

The Court will now adjourn briefly to reconstitute.

AT 10.44 AM THE MATTER WAS CONCLUDED